Question

Investors got a rude awakening yesterday as U.S. stocks started the day with declines. An acceleration occurred late in the trading day, with the Dow Jones Industrial Average DJIA, -4.60% eventually closing down 1,175 points, or 4.6%, at 24,346. The S&P 500 Index SPX, -4.10% tumbled 4.1% to 2,649. For perspective, it has been only two months (Dec. 8) since the Dow closed at a lower level than it did Monday. Do you think we are heading towards a bear market? Are stocks over valued? What do you think has caused this most recent decline? Each investor's situation is different, but how would you suggest someone in his/her 20s allocate his/her assets, or what do you advocate investing in?

Answer 1

As the Dow closed at a lower level than monday just before 2 months we can say that there might be a bearish run in the market as the investors might think for profit booking due to over valuation of the stock.Also on monday the market tumbled around 4.6% meaning that within these 2 months there is a recovery in the market after the lowest level as on dec 8. So as the market has recovered significantly we can say that we are heading towards a bearish market as the investors might sell off there stocks purchased around 8th december in order to book there profit. Also a significantly recovery in the market means that the stocks are over valued. The cause for the decline can be the profit booking of investors. Someone in his/her 20s should invest as most of his investment are out of his savings and he can remain invested for long term as per his age. Also he should invest in long term asset giving a sufficient return for long term as he might not need the money invested in recent time.